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The housing market remains oversupplied by 860,000 units when compared to a 10-year average inventory and the overhang represents a direct contradiction to the spirit of Tuesday's headlines describing new data from the National Association of Realtors.


Major media said that “Home Sales Exceed Forecasts” (Bloomberg) and “Sales Rise 7.4%” (Wall Street Journal) and “Sales of Existing Homes Surge” (MarketWatch) and the data providers described “Another Big Gain in Existing Home Sales” (National Association of Realtors) .

If you view the chart above you see supply exceeds long-term inventory averages by 32% -- a significant hurdle despite a count of months-of-supply inventory which is just 12% above average and is practically normal (see below). The disconnect in the measure of excess between units for sale and months of supply suggests a logical problem with the data.

inventory months of sales NAR 1999 to 200911

If you were to depend upon the months-of-supply figure, you would estimate the market is very close to a long-term equilibrium. Look next at the unadjusted unit-sales figures -- which are the only figures I look at.

unit sales NAR 1999 to 200911

The numbers look less promising when you see that unadjusted sales figures show the last 12 months of activity is very similar to a bad year last year (see above). We are headed in to the doldrums this year with a special un-trainable child locked in the attic: A mammoth set of delinquent mortgages (see chart below where X = the set of inventory plus delinquent mortgages.

And 3.5 million units for sale is not nothing when it should be 2.7 million.

inventory (units) sales (units) NAR 1999 to 200911

With the most knowledgeable sources saying that the cure rate for delinquent mortgages has fallen in to the abyss of “rarely or never” (see below), you would be right to conclude that the federal government can only stop this hellfire by actually paying the monthly bill for homeowners who are behind. Since they are funding every new mortgage, maybe it’s possible they can pay the mortgage too? Think of it as citizen-friendly quantitative easing.

mortgage performance cure rate

You can’t fight the Fed, but even Superman cannot win in the presence of kryptonite. Foreclosures are kryptonite. It’s possible the United States government can be beaten. The trend in mortgage payments says they will lose.

The inventory of existing homes for sale is not a source of intelligent confidence. If the Fed and Treasury fail in their desperate mission in the housing market, every recent purchaser will be a victim of fraud. Even if the Fed and Treasury are successful, the risk has not been disclosed to buyers, who don't have slightest idea what it means when Fannie (FNM), Freddie (FRE), and the FHA fund every new mortgage in the United States.

The Fed and Treasury are now perpetrators of a fraudulent scheme probably greater than any market manipulation previously known to the history of the world.

The first time homeowners dancing to their positive tune may be remembered as dead persons buying. Even Angelo Mozilo would find this game too unfair and corrupt.

Look who is running the systemic criminal enterprise now.

superman dead on the ground



Disclosure: None.

Source: Housing Market Remains Oversupplied by 860,000 Units